Abbott to buy Piramal unit for $3.7 bn
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After multiple denials, Piramal has announced that it has sold its healthcare business.
Abbott Laboratories Inc will pay $3.72 billion to acquire India's Piramal Healthcare's pharmaceutical solutions business, as global drugmakers look to boost their presence in emerging markets.
Takeover speculation had swirled around Piramal, with media reports highlighting Sanofi-Aventis, Pfizer Inc, and GlaxoSmithKline as possible buyers.
Abbott said it will pay $2.12 billion up-front and make annual payments of $400 million for the next four years, beginning in 2011. The U.S.-based company said the deal will make it the largest drugmaker in India.
Global demand for generic drugs from Indian drugmakers such as Ranbaxy Laboratories and Dr Reddy's Laboratories, the top two players by sales, and local rival Cipla, is booming as governments battle rising healthcare costs.
Emerging markets, where cheaper generic medicines form the bedrock of sales, are the new battleground for the world's top drugmakers as sales stall in Western markets.
Piramal has got good money for the business, said Sarabjit Kour Nangra, an analyst with Angel Broking in Mumbai. Now their growth will depend on how they scale up the residual business.
Shares in Piramal, which the market values at roughly $2.6 billion, fell as much as 9 percent to the day's low but pared losses later and were down 0.8 percent. Abbott India shares rose 7.4 percent.
On Wednesday, Piramal Healthcare denied media reports the founders were selling a stake in the drug maker.
Abbott plans to fund the deal with cash on its balance sheet and said the transaction would not change its earnings outlook for 2010.
Piramal's pharma solutions business makes and sells cheaper versions of patented drugs and the unit accounts for more than half of its revenue. Piramal's other interests include manufacturing for third parties and pathology laboratories.
Abbott said the combined sales force would be the largest in the industry in India, and forecast sales in India of more than $2.5 billion by 2020.